TULE: There Is Sense In Sustaining Some Of Outgoing Govt’s Economic Policies
The Director in charge of monetary policy at the Central Bank of Nigeria, Moses Tule, was one of the bank’s officials that attended the just concluded World Bank and International Monetary Fund (IMF) Springs Meeting, held in Washington DC. During an interaction with Kamal Tayo Oropo, he advised the incoming administration to sustain current economic regime for the growth of the country.
There have been calls for continuity of present economic policies. Which of these policies, in your opinion, would you want to sustain? DEFINITELY, the call by the IMF for policy continuity is perfectly in order because: First, you do not just jettison macro economic policy in the middle of their implementation.
The kind of crisis you are going to cause will be much more fundamental to what you set out to address. By macro economic policy, we are looking at fiscal policy and monetary policy.
At this moment, we are fighting a major shock, that shock is the drop in oil prices. The set of macro economic policy that are presently in place are policies that are solidly thought out; they were well thought out.
Since we came and in all the interactions that we’ve had with people, they have confirmed that the policies that are in place are in order. You don’t just jettison policies in the middle of implementation.
If you do, you will cause a more fundamental crisis than what you set out to achieve. And for now, where we are in the country, it is difficult to say that there is a way out.
There will be a way out when we have recovered from this shock and have given sufficient fiscal buffers to be able to absorb the shocks, then you can be able to relax both fiscal policies and the current country’s policies that are in place. So, the calls are perfectly in order. Nigerians seem to be antagonistic whenever removal of oil subsidy is raised.
How can Nigeria overcome the subsidy problem? You need to understand that oil subsidy was put in place at a time when the total population of Nigerians and the total number of people that had motorised vehicles were few in number.
Now, the number of people who have motorised vehicles and the number of vehicles on the roads is much higher. So, the demand for oil is higher for domestic consumption.
By implication, and since the refineries are not working to full capacity and we are importing fuel, it means the subsidy is much higher. For most countries, and as a result of the fall in oil price, they are using the situation to address the issue of subsidy once and for all; to remove subsidy.
So, it is not a policy that is peculiar to Nigeria. It is a sound macro economic policy that most countries are adapting; it is not peculiar to Nigeria alone. But we then have to look at the management of oil earnings, which is important.
If you remove the subsidy, you must reform the sector and look at the way we are managing the earnings from oil, which is very critical.
Do you expect the new government to have the political will to pass the PIB Law? Given the kind of mandate the incoming government received from Nigerians, I believe they will have political will to do what is right for the country and they know that passing the bill is an important route to reforming the oil industry in the country.
It is critical. And if you ask me, I’ll tell you that it is a policy that the government should pursue with vigour. It has eluded many governments, but it is time something is done.
The new government has tremendous goodwill from Nigerians, and I believe they can leverage on that goodwill to get the PIB passed. There have also been calls that government should reduce recurrent spending, how do you look at that?
The suggestion is to slow down on recurrent expenditure, so that your size of investment in public infrastructure grows, capital investment grows, while recurrent expenditure drops, because it makes no meaning; we are not leaving any future for Nigerians if we are spending 80 percent of our earnings today on recurrent consumption and that is what it is about our recurrent expenditure.
If you are not investing on infrastructure, you cannot have an economy that is resilient and that can absorb shock. That is why as a country, we were severely hit by the drop in oil prices, because investment in public expenditure has been quite low. So, if anything, there should be an investment in public infrastructure.
Specifically, in what ways do you expect the incoming government to confront some of these challenges? In repositioning the country, you talk about growing the economy, it is the only thing we can do and how we want to do that, the government has to take a holistic look at its expenditure pattern, look at the growth areas of the economy and try to promote them.
Look at areas that can create employment for the youth. We realised that about 1.2 to 1.3 million youths graduate from our universities every year, into the labour market.
We need to create jobs commensurate to that level of graduates; otherwise we would have a potential crisis at hand. That is going to be a key focus of the government; that is very important.